Buying gold coins or bars is said to be investors' safest bet. But selling is
another matter.

Bullion dealers, cash-for-gold outlets and hundreds of online companies selling gold coins and bars have sprung up in recent years as investors have looked to cash in on rising gold prices. You can now buy and sell bars on your mobile phone, and there are even vending machines dispensing ingots in shopping centres.

But how easy is it to cash in gains if you have invested in the precious metal? For many investors the attraction of gold is that it is a tangible asset. After the financial crisis many want to invest in a product which should hold its value should stock markets crash, banks collapse or if governments printing more money decreases the value of "paper" currencies.

But how easy is it to sell and realise the value of gold ingots, sovereigns or exotic coins such as the US Buffalo, the Chinese Panda or the Austrian Philharmonic?

After all, even if these real assets have risen in value, it is of limited use if you can't derive an income from them, sell them at their current price or spend them.

One reader who contacted The Daily Telegraph said the sales process may not be as transparent as many people think. He bought a 1oz Britannia gold coin for £1,129 just over a year ago – as gold prices peaked. With prices falling, he decided to try to sell it.

"I phoned a number of dealers, but all said they would only buy back their own coins, making it difficult to shop around," the man said. "The dealer that sold me the coin will buy it back, but at a lower price to what it is currently selling the same coins for."

In many markets, dealers make their money through the difference in price – known as a spread – at which they buy and sell the same asset on the same day. This applies to gold coins as well as holiday money, used cars and so on.

But with certain types of gold this spread can be high, particularly for less tradable coins, and it can be increased at times of falling markets. However, few people ask about sales costs when they are buying gold.

Most major gold dealers contacted by The Daily Telegraph said they would buy coins they had not sold, although in some cases the price they paid would be lower.

If you have bought bullion in the form of bars or ingots, and paid the dealers to store it, it is usually only possible to sell it back through the same dealership.

On the face of it buying bars (or ingots) can look like better value for money, because it is usually bought and sold in larger quantities.

However, if you want to cash in just part of your holding this may be easier if you own coins: if you own 10 sovereigns, you can sell one. This may not be possible if you've used all your money to buy one bar. This flexibility often comes at a cost and the spreads can be larger. BullionByPost – the company from which our reader bought his Britannia coin – explained that its standard dealing charges mean it purchases coins at 98pc of the current gold price. This spread widens to 97pc of the spot price if it was buying coins that were sold initially by a different dealership.

However, these standard charges may be waived for those selling "significant" quantities of gold – for example 10 or more sovereigns. In such cases it would buy back at 100pc of the spot price. Bullion Store said it has a 4pc spread; Baird said it would buy coins at 98pc of the spot price – regardless of where it was bought. But investors should not assume that this is necessarily the full cost of the "spread". Most investors will have paid significantly more than the prevailing spot price when they bought the coins in the first place.

The exact margin will depend on the type of coin bought, how much of it they were buying and where they were buying it from. At BullionByPost, for example, the cost of one sovereign is currently £277 (on Wednesday prices). This is a 10pc premium on that day's gold price. So with a 2pc selling price, investors will need to see gold prices rise by at least 12pc before they can make money on the transaction.

This is of course a considerably higher margin than the spread charged on most unit trusts, shares or exchange-traded funds.

The margins are better if you are investing more or buying coins with a higher gold content. A 1oz Britannia coin – currently selling for £1,042 – is at 6.5pc above the gold price, given the quantity of the metal in the coin.

In contrast a 1oz bar – which contains the same amount of gold as the Britannia coin – trades at a premium of only around 4.5pc. But those buying a 1g bar – which contains as much gold as you could fit on your little fingernail – will pay a 45pc premium on gold spot price. You would have to hold this for a long time or prices would have to rocket to see any kind of profit.

First produced in 1967, the 1oz South African Krugerrand is the most common gold coin on the planet and so normally trades at the cheapest premium over the spot price.

But for many UK buyers, sovereigns or Britannia coins remain the most popular, because, as they are still legal tender, no capital gains tax is due on profits made. Whatever coins or bullion you buy there is no stamp duty or VAT to pay.

There may be other costs to factor in as well: you will need to pay for a secure and traceable postage service if you are selling the items, and there is the cost of insuring the coins or bars yourself.

If you have larger bullion, firms will offer prices far closer to the spot price, but investors have to pay storage and insurance costs. For many investors the most cost-effective way to gain exposure to rising gold prices is through the stock market, either via an exchange-traded fund, which tracks the gold price, or through a fund which invests in gold mining shares.

The latter may not track movements in gold prices so closely – in fact, at present the value of such shares lags the spot price considerably, which may mean it could increase sharply if the gold price picks up again. ETF Securities, for example, offers two gold-related exchange-traded funds.

The first, Gold Bullion Securities, allows investors to cash it in for physical gold at any time (although they will pay additional delivery fees to use this facility). The other, ETF Securities Physical Gold, does not allow this, but it can be held within an Isa.

The spread to buy and sell these is between 0.3pc and 0.6pc – so if you bought £100 of this fund you would pay around 30p to buy it, plus a further 30p to sell it again.

The Telegraph Investor

Editor's comment:

Priced to be great value for new investors and those with large portfolios.